Consolidated Motors is a US-based corporation that sells mechanical engines and components used by electric utilities. Its Canadian subsidiary, Consol-Can, operates solely in Canada. It was created on 31 December 20X1, and Consolidated Motors determined at that time that it should use the US dollar as its functional currency. Chief Financial Officer Monica Templeton was asked to explain to the board of directors how exchange rates affect the financial statements of both Consol-Can and the consolidated financial statements of Consolidated Motors. For the presentation, Templeton collects Consol-Cans balance sheets for the years ended 20X1 and 20X2 (Exhibit 1), as well as relevant exchange rate information (Exhibit 2). Exhibit 1 Consol-Can Condensed Balance Sheet for Fiscal Years Ending 31 December (C$ millions) Account 20X2 20X1 Cash 135 167 Accounts receivable 98 Inventory 77 30 Fixed assets 100 100 Accumulated depreciation (10) Total assets 400 297 Accounts payable 77 22 Long-term debt 175 175 Common stock 100 100 Retained earnings 48 Total liabilities and shareholders equity 400 297